Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $ 10 comma 000 with terms of 2/10 Net 40, so the supplier will give them a 2 % discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $ 10 comma 000 in one month when the invoice is due. H2M is considering three options: Alternative A: Forgo the discount on its trade credit agreement, wait and pay the full $ 10 comma 000 in one month. Alternative B: Borrow the money needed to pay its supplier today from Bank A, which has offered a one-month loan at an APR of 12.3 %. The bank will require a (no-interest) compensating balance of 4.8 % of the face value of the loan and will charge a $ 100 loan origination fee. Because H2M has no cash, it will need to borrow the funds to cover these additional amounts as well. Alternative C: Borrow the money needed to pay its supplier today from Bank B, which has offered a one-month loan at an APR of 14.8 %. The loan has a 1.3 % loan origination fee, which again H2M will need to borrow to cover.
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one...
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $ 11 comma 000 with terms of 2.4/10 Net 40, so the supplier will give them a 2.4 % discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $ 11 comma 000 in one month when the invoice is due. H2M is considering...
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $ 10 comma 000$10,000 with terms of 22/10 Net 40, so the supplier will give them a 2 %2% discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $ 10 comma 000$10,000 in one month when the invoice is due. H2M is considering...
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $13,000 with terms of 1.8/10 Net 40, so the supplier will give them a 1.8% discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $13,000 in one month when the invoice is due. H2M is considering three options: Alternative A: Forgo the discount...
Need the EAR for each alternative please Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $11,000 with terms of 2/10 Net 40, so the supplier will give them a 2% discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $11,000 in one month when the invoice is due. H2M is considering three...
Exercises #11 1. Xtra Corporation needs $50,000 for three months to finance its working capital. The company has arranged a short-term loan with a bank. The bank charges 8% annual interest rate with interest paid in advance. The bank also requires 5% of the borrowed amount as a compensating balance. Assume Xtra does not have money to serve as a compensating balance and pay interest upfront 1.1 How much Xtra have to borrow? 1.2 Find effective cost of bank loan...
Jamison Inc. needs to raise $500,000 for a nine-month term. Jamison's bank has offered to lend Jamison the money at a 8.00% simple interest rate. Jamison will receive the $500,000 upon approval of the loan and will pay back the principal and interest at maturity. Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan. Value Interest payment Amount of cash received Annual percentage rate (APR) Effective...
1. Community Hospital has annual net patient revenues of $150 million. At the present time, payments received by the hospital are not deposited for six days on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to one day. If these funds released by the lockbox arrangement can be invested at 8 percent, what will the annual savings be? Assume the bank fee will be $2,000 per month. 2. St. Luke’s Convalescent Center has...
Fleda's Beauty Company has $200,000 of total assets and earns 20 percent interest and taxes on these assets. The ratio of total debts to total assets (or DR been set at 50 percent. The interest rate on short-term debt is 7 percent, while the interest rate on long-term debt is 10 percent. A conservative policy calls for only long-term debt with no short-term debt; an intermediate policy calls for 50 percent short-term debt and 50 percent long-term debt; and an...
Real Estate Finance answer all please . John Corbitt takes a fully amortizing mortgage for $80,000 at 10 percent interest for 30 years, monthly payments. What will be his monthly payment? 2. Dave Burns wants to buy a house. To do so, he must incur a mortgage. A local lender has determined that Dave can afford a monthly payment of $600, principal and interest. If the current interest rate on 30-yearm fixed-rate mortgage is 9.50 percent, what is the maximum...
Use the following to answer questions 1-4. You currently live (rent free) in your parents' basement but it's a bit awkward when you bring dates home. Your friends are looking for a new roommate and have asked if you're interested in moving in. Your share of the rent (which includes all utilities) will be $800 per month, due at the beginning of the month, and you will be signing a two-year lease. You parents think you should save your money...